Correlation Between Health Care and Fmasx

Can any of the company-specific risk be diversified away by investing in both Health Care and Fmasx at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Health Care and Fmasx into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Health Care Ultrasector and Fmasx, you can compare the effects of market volatilities on Health Care and Fmasx and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Health Care with a short position of Fmasx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and Fmasx.

Diversification Opportunities for Health Care and Fmasx

0.46

Correlation Coefficient

Health Care  Fmasx

Very weak diversification

The 3 months correlation between Health and Fmasx is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Ultrasector and Fmasx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fmasx and Health Care is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Health Care Ultrasector are associated (or correlated) with Fmasx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fmasx has no effect on the direction of Health Care i.e., Health Care and Fmasx go up and down completely randomly.

Pair Corralation between Health Care and Fmasx

Assuming the 90 days horizon Health Care Ultrasector is expected to generate 1.16 times more return on investment than Fmasx. However, Health Care is 1.16 times more volatile than Fmasx. It trades about 0.22 of its potential returns per unit of risk. Fmasx is currently generating about 0.2 per unit of risk. If you would invest  10,020  in Health Care Ultrasector on October 26, 2024 and sell it today you would earn a total of  483.00  from holding Health Care Ultrasector or generate 4.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Health Care Ultrasector  vs.  Fmasx

Health Care Ultrasector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Health Care Ultrasector has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Health Care is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fmasx

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fmasx are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fmasx is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Health Care and Fmasx

The main advantage of trading using opposite Health Care and Fmasx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Care position performs unexpectedly, Fmasx can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Fmasx will offset losses from the drop in Fmasx's long position.

The idea behind Health Care Ultrasector and Fmasx pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.